McClatchy files for bankruptcy; analyst reactions

Industry watchers are chiming in after last week’s announcement that McClatchy, the second-biggest newspaper publisher in the country by circulation, filed for Chapter 11 bankruptcy.

If the court okays the plan, McClatchy would give control of the company to New Jersey-based hedge fund Chatham Asset Management.

Ken Doctor, in his Newsonomics column at Nieman Lab, asks “Does Chatham want to be an operator of a newspaper company for any period of time? Or will it try to transmute its suddenly shinier asset through the alchemy of the hour, consolidation?”

“For Chatham, the main question is this: Can it make more money merging with Tribune/Alden — or maybe an again restructured Gannett/GateHouse/Apollo — than it can operating independently?” writes Doctor.

“It is conjectural at this early stage how Chatham will run the company,” writes Rick Edmonds, Poynter’s media business analyst. “This is not its first foray into scooping up a news organization in deep financial trouble. It controls American Media, a group of glossy magazines that includes Men’s Journal and Us Weekly, and the National Enquirer (which it is trying to sell). And since 2016, it has also had a controlling stake in Postmedia, a huge chain of Canadian dailies."

Newsroom cuts could be in the cards but not for sure, Edmonds writes.

Details of the filing

The Chapter 11 filing provides immediate protection to the company, which will continue to operate as usual as it pursues approval of the restructuring plan with its secured lenders, bondholders and the Pension Benefit Guaranty Corporation, the company says.

McClatchy and each of its 53 wholly owned subsidiaries filed their voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York.

The company has obtained new $50 million debtor-in-possession financing from Encina Business Credit which, coupled with McClatchy's normal operating cash flows, provides liquidity for Sacramento-based McClatchy and all of its local news outlets to fulfill ongoing commitments to stakeholders, the company says. The company aims to emerge from this process in the next few months, said a news release on the filing.

The plan would allow McClatchy to reorganize its over $700 million in debt. Sixty percent of the debt be eliminated under the plan, a McClatchy story said.  

The new owners, led by Chatham, would run it as a privately held company, so its shares would not be traded on the NYSE American stock exchange. The company is beginning the process of being delisted, the story said.

Signs of financial distress had been piling up at McClatchy. The company saw rounds of buyoffs and layoffs in 2019. In recent months, McClatchy has moved to cut Saturday print at its dailies. The company skipped a $12 million debt-interest payment due Jan. 15. The company also missed a pension payment in January.

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